SEPA, Efficiency, and Payment Card Competition
This paper analyzes the welfare implications of creating a Single Euro Payments Area. We study the effects of increased network compatibility and payment scale economies on consumer and merchant card fees and its impact on card usage. In particular, we model competition among debit cards and between debit and credit cards. We show that competitive pressures dampen merchant fees and increase total card acceptance. The paper argues that there is room for multilateral interchange fee arrangements to achieve optimal consumer and merchant fees, taking safety, income uncertainty, default risk, merchant's pricing power, and the avoided cost of cash at the retailers side into account. Consumers and merchants are likely to benefit the most from the creation of SEPA when sufficient payment card competition alleviates potential monopolistic tendencies. Key Words: SEPA, card network competition, optimal pricing, economic welfare
|Date of creation:||Jan 2010|
|Date of revision:|
|Contact details of provider:|| Postal: Postbus 98, 1000 AB Amsterdam|
Web page: http://www.dnb.nl/en/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Julian Wright, 2001.
"The Determinants of Optimal Interchange Fees in Payment Systems,"
- Julian Wright, 2004. "The Determinants of Optimal Interchange Fees in Payment Systems," Journal of Industrial Economics, Wiley Blackwell, vol. 52(1), pages 1-26, 03.
- Wright, Julian, 2001. "The Determinants of Optimal Interchange Fees in Payment Systems," Working Papers 176, Department of Economics, The University of Auckland.
- Iftekhar Hasan & Heiko Schmiedel & Liang Song, 2012.
"Returns to Retail Banking and Payments,"
Journal of Financial Services Research,
Springer;Western Finance Association, vol. 41(3), pages 163-195, June.
- Guido K. Schaefer, 2008. "An Economic Analysis of the Single Euro Payments Area (SEPA)," FIW Working Paper series 011, FIW.
- Gene Amromin & Sujit Chakravorti, 2009. "Whither Loose Change? The Diminishing Demand for Small-Denomination Currency," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(2-3), pages 315-335, 03.
- Sujit Chakravorti & Roberto Roson, 2004.
"Platform competition in two-sided markets: the case of payment networks,"
Working Paper Series
WP-04-09, Federal Reserve Bank of Chicago.
- Chakravorti Sujit & Roson Roberto, 2006. "Platform Competition in Two-Sided Markets: The Case of Payment Networks," Review of Network Economics, De Gruyter, vol. 5(1), pages 1-25, March.
- Fernando E. Alvarez & Francesco Lippi, 2007.
"Financial Innovation and the Transactions Demand for Cash,"
NBER Working Papers
13416, National Bureau of Economic Research, Inc.
- Fernando Alvarez & Francesco Lippi, 2009. "Financial Innovation and the Transactions Demand for Cash," Econometrica, Econometric Society, vol. 77(2), pages 363-402, 03.
- Alvarez, Fernando & Lippi, Francesco, 2007. "Financial Innovation and the Transactions Demand for Cash," CEPR Discussion Papers 6472, C.E.P.R. Discussion Papers.
- Fernando Alvarez & Francesco Lippi, 2007. "Financial Innovation and the Transactions Demand for Cash," EIEF Working Papers Series 0807, Einaudi Institute for Economics and Finance (EIEF), revised Sep 2007.
- W. Bolt, 2003. "Retail Payments in the Netherlands: some Facts and Some Theory," WO Research Memoranda (discontinued) 722, Netherlands Central Bank, Research Department.
- Guthrie, Graeme & Wright, Julian, 2003.
"Competing Payment Schemes,"
173, Department of Economics, The University of Auckland.
- ?zlem Bedre-Defolie & Emilio Calvano, 2013.
"Pricing Payment Cards,"
American Economic Journal: Microeconomics,
American Economic Association, vol. 5(3), pages 206-31, August.
- Wilko Bolt & David B. Humphrey, 2007.
"Payment network scale economies, SEPA, and cash replacement,"
07-32, Federal Reserve Bank of Philadelphia.
- Bolt Wilko & Humphrey David, 2007. "Payment Network Scale Economies, SEPA, and Cash Replacement," Review of Network Economics, De Gruyter, vol. 6(4), pages 1-21, December.
- Christine Beijnen & Wilko Bolt, 2008.
"Size Matters: Economies of Scale in European Payment Processing,"
FIW Working Paper series
- Beijnen, Christine & Bolt, Wilko, 2009. "Size matters: Economies of scale in European payments processing," Journal of Banking & Finance, Elsevier, vol. 33(2), pages 203-210, February.
- Christine Beijnen & Wilko Bolt, 2007. "Size matters: economies of scale in European payments processing," DNB Working Papers 155, Netherlands Central Bank, Research Department.
- Wright, Julian, 2003. "Optimal card payment systems," European Economic Review, Elsevier, vol. 47(4), pages 587-612, August.
- Wilko Bolt & Sujit Chakravorti, 2008.
"Consumer choice and merchant acceptance of payment media,"
Working Paper Series
WP-08-11, Federal Reserve Bank of Chicago.
- Wilko Bolt & Sujit Chakravorti, 2008. "Consumer Choice and Merchant Acceptance of Payment Media," DNB Working Papers 197, Netherlands Central Bank, Research Department.
- repec:rje:randje:v:37:y:2006:3:p:645-667 is not listed on IDEAS
- James McAndrews & Zhu Wang, 2007.
"Microfoundations of Two-sided Markets: The Payment Card Example,"
DNB Working Papers
128, Netherlands Central Bank, Research Department.
- James J. McAndrews & Zhu Wang, 2006. "Microfoundations of two-sided markets: the payment card example," Payments System Research Working Paper PSR WP 06-01, Federal Reserve Bank of Kansas City.
- Mark Armstrong, 2005.
"Competition in Two-Sided Markets,"
- Chakravorti, Sujit & To, Ted, 2007. "A theory of credit cards," International Journal of Industrial Organization, Elsevier, vol. 25(3), pages 583-595, June.
- Wilko Bolt & Sujit Chakravorti, 2008.
"Economics of payment cards: a status report,"
Federal Reserve Bank of Chicago, issue Q IV, pages 15-27.
- Kemppainen, Kari, 2008. "Integrating European retail payment systems : some economics of SEPA," Research Discussion Papers 22/2008, Bank of Finland.
- Schmalensee, Richard, 2002.
"Payment Systems and Interchange Fees,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 50(2), pages 103-22, June.
- Baxter, William F, 1983. "Bank Interchange of Transactional Paper: Legal and Economic Perspectives," Journal of Law and Economics, University of Chicago Press, vol. 26(3), pages 541-88, October.
- Heiko Schmiedel, 2007. "The economic impact of the Single Euro Payments Area," Occasional Paper Series 71, European Central Bank.
When requesting a correction, please mention this item's handle: RePEc:dnb:dnbwpp:239. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rob Vet)
If references are entirely missing, you can add them using this form.